Price Transparency

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I recently had the privilege of participating in a panel discussion for the medical students in the Quality Improvement Pathway at MCW.  One of the questions we were asked to address was “How do you anticipate addressing the need to provide point-of-service price information for healthcare?”

The four of us at the table in front looked back and forth at each other; clearly no one wanted to tackle that one.  How about a softball like “How can we completely eliminate medical errors?” or “What three simple actions will bring lasting peace to the Middle East?”  Seriously, point-of-service prices for medical care?

We know that consumerism in healthcare is increasing, thanks in large part to the exponential growth in high deductible health plans – a trend unlikely to be reversed any time soon.  With patients responsible for a larger share of costs, at a time when household income is basically stagnant, people are factoring cost into account like never before.  What are providers doing in response to that?  The answer, frankly, is not nearly enough.

There have been some efforts at transparency, sometimes in an attempt to gain a competitive advantage, sometimes in response to legislation.  But these have been pretty rudimentary.  List price, or the “charge master” price, bears a distant relationship to the amount a given patient actually has to pay.  And of course, the total cost of an episode of care depends on what happens during that episode.  Some pioneers are beginning to offer bundled prices for specific services or procedures – a fixed amount for, say, a routine checkup, or a tonsillectomy or knee replacement.  That gives the provider some element of financial risk: if the actual cost of performing that service is higher than anticipated, the provider loses.  It also makes it possible for prospective patients to comparison shop, at least on price.

But for many services, pricing remains a la carte, and therefore complicated.  Moreover, for most products and services – especially medical care – cost is not the only factor being compared.  Quality – and this includes effectiveness, safety, and experience – matters.  It’s really value that consumers are seeking.  That’s hard to do at the point of sale.  Nobody buys a car or a computer without doing some research.  I certainly hope no one ever buys a knee replacement that way.  What’s needed is information to allow prospective patients to determine and compare value before the point of service.

There are some initial efforts, all leaving much to be desired.  On the one hand we have the insurers.  Some already have tools to allow people to compare “value.”  On the plus side, someone can see what their actual out of pocket cost will be from a selected provider, based on negotiated rates and cost sharing specifics for the individual’s plan.  But the quality information is often suspect, frequently boiled down to a simple, and simplistic, 3 star rating system.  In most cases, that quality metric is heavily weighted toward what the insurer most cares about – cost.  There’s relatively little about outcomes or experience, the things that matter to patients.

On the other hand, we have information from the providers.  Many hospitals feature a quality section of their Websites.  Often the data are cherry picked, or are at best indirect measures of quality, such as the volume of procedures performed.  (McDonald’s sells lots and lots of hamburgers.  So what.)  And even when price information is provided, it’s still going to be difficult if not impossible for someone to interpret what that means to their bottom line.

The environment is ripe for a third-party source of information on value in healthcare.  Something like Consumer Reports.  And if we are serious about the value proposition, we should not fear this, we should embrace it and promote it.  What would the ideal value information look like?  Here are some elements:

  • objective, neutral, trusted source, free of conflicts of interest
  • validated, risk-adjusted quality metrics including the domains of effectiveness, safety, and experience, measured uniformly across providers
  • cost information relevant to the decision maker – ideally, their actual out of pocket expense, though a reasonable substitute might be a relative cost (e.g., the ratio of payments to that provider from all payers for a given procedure, compared with the average payments to all providers in a region)
  • footnotes to explain unusual variations
  • unbiased explanations of terms and concepts

This last one is important.  I can look at a comparative rating of computers, but if I don’t understand what RAM does, or what a gigabyte is, it’s not that helpful.  A couple of years ago at a conference I heard a speaker claim that one of the big growth industries would be in “medical interpreting,” meaning the ability to write about complex medical care issues and explain them in a way that consumers can use the information to assess and compare.  I have to imagine that some of those medical students we spoke with may be poised to do exactly that.

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